Crude Oil
Oil slumped over 3% on Friday and posted its biggest monthly drop in six months, after U.S. President Donald Trump stoked global trade tensions by threatening tariffs on Mexico. Brent crude futures fell $2.38 to settle at $64.49 a barrel. WTI crude futures fell $3.09 to $53.50 a barrel.
Brent futures posted an 11% slide in May and WTI a 16% drop, their biggest monthly losses since November.
Trump vowed on Thursday to ratchet up tariffs unless Mexico stopped people from illegally crossing into the United States. The plan would impose a 5% tariff on Mexican imports starting on June 10 and increase monthly up to 25% on Oct. 1. This would probably hit the lucrative cross-border energy trade. The United States also exports more fuels to Mexico than any other country, according to the U.S. Energy Department. So far Mexico has not said whether it would retaliate. Mexican President Andres Manuel Lopez Obrador on Friday urged Trump to back down from the threats. Investors were already worried that the U.S.-China trade war increased the danger of a recession.
Additional levies by Beijing on the majority of U.S. imports on a $60 billion target list are due to take effect on Saturday, in response to Washington’s move this month to slap further tariffs of up to 25% on $200 billion of Chinese goods.
U.S. energy firms increased the number of oil rigs operating for the first week in four, adding three oil rigs. But in May the rig count was reduced for the sixth straight month.
Hedge funds and other money managers cut combined futures and options position in New York and London in the week to May 28 by 38,030 contracts to 212,080, according to the weekly CFTC report.
Naphtha
Asia’s naphtha crack ended the month at nearly 7-year low of $5.47 a tonne on the back of a persistent glut that had turned spot prices of open-specification into discounts.
Taiwan’s Formosa Petrochemical, also Asia’s top naphtha importer, bought about 100,000 tonnes of light fuel with at least 77% paraffin content for July arrival at Mailiao at discounts within the range of $3 tonne to $4 a tonne to its own price formula on a cost-and-freight (C&F) basis.
This was in sharp contrast to the premiums of between $5 and $6 it had paid on April 29 for cargoes arriving in first-half June. This was also the lowest price Formosa has paid since Dec. 13. South Korea’s YNCC had already paid discount for open-specification naphtha on May 23.
But naphtha is the worst performing oil product for refiners at present in terms of margins.
The June crack is lower at – $7.75 /bbl;
Gasoline
No fresh news on the gasoline markets. Gasoline stocks in ARA shrank by 97 KT to 840 KT.
The June crack is lower at $ 3.70 /bbl
Click Here for a graphical depiction of Global Gasoline stocks by region.
Distillates
Cash differentials for 10ppm gasoil were at a premium of 3 cents a barrel to Singapore quotes, compared with a discount of 2 cents per barrel on Thursday. The June/July time spread for gasoil with 10ppm sulphur content was at a premium of 10 cents per barrel on Friday, compared with 3 cents on Thursday.
The gasoil market in Asia has been under pressure from abundant supplies, especially from China, where domestic consumption of refined fuel has dropped. China’s April diesel consumption slumped 8.1%, the National Development and Reform Commission said on Thursday. With new refining capacities coming up alongside China’s higher export quotas for this year, the country would continue to add more barrels to the Asian gasoil market.
Gasoil Stocks in ARA burgeoned to 2.81 million tonnes, an increase of 246 KT.
Cash discounts for jet fuel were at 16 cents a barrel to Singapore quotes on Friday, compared with a discount of 19 cents per barrel a day earlier.
The June crack for 500 ppm Gasoil is lower at $ 13.75 /bbl with the 10 ppm crack at $ 14.45 / bbl. The regrade is at -$ 0.25 /bbl
Click Here for a graphical depiction of Global Distillate stocks by region.
Fuel Oil
The front-month 380-cst barge crack jumped on Friday, narrowing its discount to Brent crude as benchmark crude oil prices extended losses.
The June 380-cst barge crack to Brent crude was at minus $6.55 a barrel on Friday, up from minus $7.69 a barrel in the previous session. The front-month crack discount was last narrower on April 12 at minus $6.48 a barrel.
ARA fuel oil inventories shrank by 21 KT to 1.09 million tonnes.
The June180 cst crack is higher at – $ 1.65 / bbl with the visco spread at $ 2.00 /bbl.
Click Here for a graphical depiction of Fuel Oil stocks by region.
Hedge Recommendations
The strengthening of the fuel oil market reflects the bullish undercurrent of the market. We will hedge the August crack at -$1.00 /bbl. If the July crack goes into a premium, we will hedge that as well in the future.
Hedge recommendations are essentially made for refiners. These are not trading positions as such. The rationale of these positions is to lock in extraordinary levels for the refiner.
Click Here to see how all our recommendations have fared
About this blog
This blog post attempts to give a top level summary of the Singapore market goings on to a person who seeks to obtain a directional sense of the market on a daily basis.